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Control Office announced that two new sections were being added to permit payment of certain South Vietnamese checks and drafts and completion of certain South Vietnamese securities transactions.
The new sections read as follows:
(a) Any banking institution within the United States is hereby authorized to make payments from blocked accounts held for nationals of Viet-Nam south of the 17th parallel with such banking institution:
(1) Of checks and drafts drawn or issued prior to April 30, 1975, provided:
(i) The amount involved in any one payment, acceptance, or debit does not exceed $500; or
(ii) The check or draft was within the United States in process of collection by a domestic bank on or prior to April 30, 1975. (b) This section does not authorize any payment to a designated foreign country or any designated national thereof except payments into a blocked account in a domestic bank, unless such designated national is otherwise licensed to receive such payment.
(c) The authorization contained in this section shall expire at the close of business on May 30, 1975. $ 500.532 Completion of certain securities transactions.
(a) Banking institutions within the United States are hereby authorized to complete, on or before May 4, 1975, purchases and sales made prior to April 30, 1975, of securities purchased or sold for the account of nationals of South VietNam provided the following terms and conditions are complied with, respectively:
(1) The proceeds of such sale are credited to a blocked account in a banking institution in the name of the person for whose account the sale was made; and
(2) The securities so purchased are held in a blocked account in a banking institution in the name of the person for whose account the purchase was made.
(b) This section does not authorize the crediting of the proceeds of the sale of securities held in a blocked account or a subaccount thereof, to a blocked account or subaccount under any name or designation which differs from the name or designation of the specific blocked account or subaccount in which such securities were held.
Dept. of the Treasury News, Apr. 30, 1975. Fed. Reg., Vol. 40, No. 86, May 2, 1975, pp. 19202–19203.
Robert H. Miller, Deputy Assistant Secretary of State for East Asian and Pacific Affairs, testified before the International Trade and Commerce Subcommittee of the International Relations Committee of the House of Representatives on June 4, 1975, to review recent decisions on foreign assets and export controls applied to South Viet-Nam and Cambodia. The following is an excerpt from his statement:
The application of Foreign Assets Control Regulations results in a prohibition of all financial transactions and transfers of property unless licensed by the Department of the Treasury's Office of Foreign Assets Control. These controls are similar to those imposed earlier on Cuba, North Viet-Nam and North Korea. The blocking action affects Cambodian and South Vietnamese dollar accounts in the United States, dollar accounts held abroad in any institution (U.S. or foreign) and foreign currency accounts at American banks here or abroad. We are, however, licensing unrestricted withdrawals from bank accounts of private Cambodian and South Vietnamese nationals outside their country unless these persons are known to be acting on behalf of the new regimes, bank accounts of diplomats and officials of these countries who have not sworn allegiance to the new regimes and certain embassy accounts to permit an orderly closing of these embassies.
The legal basis for the assets controls is the Trading With the Enemy Act of October 6, 1917. (40 Stat. 411, as amended.) The specific section is Section 5(bX1). The Act gives the President the authority to impose these controls which have been set forth in the Foreign Assets Control Regulations (31 CFR 500.101500.808). The policy reason for imposing these controls was to deny these assets to the present regimes in Phnom Penh and Saigon and to hold the assets against future satisfaction of claims of U.S. citizens against these regimes. Such controls have proven useful in past U.S. claims negotiations.
We estimate that about $70 million of Vietnamese assets, mostly official and most of it held in the U.S., were affected by the assets control action. Cambodian assets falling under our control are about $9 million, held mostly in Singapore and London.
We do not have firm figures on U.S. investment in South VietNam, but estimates are that the amount now in Communist hands could run as high as $110 million. About $60 million is directly related to petroleum exploration. This amount does not include U.S. firms connected only with U.S. Government operations. Potential U.S. private claims against Cambodia are be lieved to be small.
imposition of export and assets controls allowed us to stabilize these economic and commercial matters in a new situation unfavorable to our policies. With these controls in force we are now in a position to assess the two regimes as they emerge and in light of their actions. Statement released at the Dept. of State news briefing, June 4, 1975. Regarding imposition of export controls for Cambodia and South Viet-Nam, see ante, Ch. 10, $ 2, pp. 524-526.
Unblocking of Foreign Assets
In Real v. Simon, 510 F.2d 557 (1975), the U.S. Court of Appeals for the Fifth Circuit, on March 27, 1975, held that although the Cuban Assets Control Regulations of the Treasury Department, Code of Federal Regulations, Title 31, Part 515, were clearly authorized under the Trading With the Enemy Act, 50 U.S.C. App. 1 et seq., 5(b), the Government could not, within the scope of that Act, validly determine in the regulations that a deceased Cuban national retains an interest in his estate. The Court said such a determination was arbitrary and without basis in either the language or purpose of the Act and could therefore not be used as a basis for withholding the decedent's assets from his heirs resident in the United States.
The sole surviving heirs of the Cuban decedent were his widow, who was a lawfully admitted resident alien, and a daughter and two granddaughters, all naturalized citizens of the United States. They had brought suit to require the Treasury Department to issue an unrestricted license which would give them their respective shares of the blocked portion of decedent's securities account located in the United States. The U.S. District Court for the Southern District of Florida had entered judgment for the Government, and the plaintiffs appealed.
The Court of Appeals reversed the District Court's judgment and held that the application of the Cuban Assets Control Regulations to the appellants would be inconsistent with the legislation from which the regulations derived their power. The Court said:
... there is no living person in the "designated foreign country" (Cuba) who retains an interest in the blocked account in question here. If neither the Government of Cuba nor any person in Cuba has any interest or claim to the blocked property, the Trading With the Enemy Act would be inapplicable, because the Act states that the power to prohibit or license transfers of property in the United States applies only to "any property in which any foreign country or a national thereof has any interest. ...” Trading With the Enemy Act, 50 U.S.C. App.
5(b)(1)(B). The Court referred to 31 CFR 515.327 (1974), which says that an estate is blocked if any designated (Cuban) national has an interest therein and goes on to state “A person shall be deemed to have an interest in a decedent's estate if he. ... was the decedent. ..." In considering whether the Government may validly promulgate a regulation which deems a decedent to have an interest in his estate, the Court considered the purposes behind the Trading With the Enemy Act and the Cuban Assets Control Regulations. The purposes had been described by the Government as: (1) to deny to Cuba or its nationals hard currency which might be used to promote activities inimical to the interests of the United States; (2) to retain blocked funds for possible use or vesting to the United States should such a decision be made; and (3) to use blocked funds for negotiation purposes in discussions with the Cuban Government.
The Court found none of these purposes as supporting the Government's action in blocking the assets in this case. It specifically rejected the Government's reliance on the second numbered purpose, noting that in 1965 there had been clear direction from Congress that it was not the intent of the United States to use the property of one group of Americans to provide compensation to another group, citing Senate Report No. 701 and House Report No. 706, 89th Congress, 1st session (1965), on the subject of unblocking the Cuban assets of American residents.
The Court of Appeals pointed out, however, that if one of the heirs in this case had been presently residing in Cuba, there would have been an interest of a foreign national in the blocked account which might, under the rationale of Nielsen v. Secretary of the Treasury, 424 F.2d 833 (1970), have prevented transfer of any part of the blocked assets.
Licensing of Transactions People's Republic of China
The Office of Foreign Assets Control, Department of the Treasury, announced on February 21, 1975, amendments of the Foreign Assets Control Regulations, 31 CFR 500, to revoke or modify provisions applicable to the People's Republic of China and its nationals that had been made obsolete by the issuance in 1971 of general licenses removing virtually all restrictions on transactions with the People's Republic of China, and to add statements of licensing policies. On May 8, 1971, section 500.546 of the Regulations had been added granting a general license, subject to certain stated exceptions, for transactions with China or its nationals (34 Fed. Reg. 8584) and on June 12, 1971, section 500.547 had been added licensing transactions involving mainland Chinese merchandise, with stated exceptions (34 Fed. Reg. 11441).
The amendments effective on February 21, 1975, include the addition to section 500.508, which licenses payments to blocked accounts in domestic banks, of paragraph (f) which requires as a condition thereof that confirmation be furnished to the Office of Foreign Assets Control of the establishment of a blocked account in the name of the designated national by the bank receiving the authorized payment.
New sections numbered 500.554–500.559 were added for the purposes of setting forth statements of licensing policies not previously published including restrictions applicable to licensing of imports from North Korea and North Viet-Nam and gifts of North Korean and North Vietnamese origin. Also included is section 500.555, entitled “Bank accounts and other property of persons who were in mainland China on or after Dec. 17, 1950, and prior to May 7, 1971,” which reads as follows:
(a) Persons who left mainland China after December 17, 1950. Specific licenses are issued unblocking the accounts and other property of persons who left mainland China after December 17, 1950, provided that they submit evidence satisfactorily demonstrating that they have established residence in a foreign country in the authorized trade territory.
(b) Non-Chinese decedents who died in mainland China on or after December 17, 1950 and prior to May 7, 1971. Specific licenses are issued authorizing the administration of the estates of non-Chinese decedents who died in mainland China on or after December 17, 1950 and prior to May 7, 1971, provided that any distribution to a blocked national of China is made by deposit in a blocked account in a domestic bank in the name of the blocked national.
See Fed. Reg., Vol. 40, No. 36, Feb. 21, 1975, pp. 7648_7652.
On October 3, 1975, the Office of Foreign Assets Control, Department of the Treasury, filed with the Federal Register amendments of the Cuban Assets Control Regulations, Title 31 of the Code of Federal Regulations, Part 515, to revoke sections 515.412 and 515.541 and to add a new section 515.559 concerning transactions with Cuba by American-owned or controlled foreign firms. Section 515.541 had authorized certain foreign firms owned or controlled by persons within the United States to trade with Cuba, but prohibited individual American citizens who were officers, directors, or key managerial personnel of such foreign firms from being involved in such trade. The revocation was intended to improve the administration of the controls by transferring compliance responsibility from individual officers and directors to the firms for which they acted. Section 515.412 was revoked as unnecessary in view of the revocation of section 515.541.
The new sec. 515.559 of Title 31 reads as follows: 8 515.559 Transactions by American-owned or controlled foreign firms with
Cuba. (a) Specific licenses will be issued in appropriate cases for certain categories of transactions between U.S.-owned or controlled firms in third countries and Cuba, where local law requires, or policy in the third country favors, trade with Cuba. The categories include:
(1) Exportation to Cuba of commodities produced in the authorized trade territory, provided:
(i) The commodities to be exported are nonstrategic;
(ii) United States-origin technical data (other than maintenance, repair and operations data) will not be transferred;
(iii) If any U.S.-origin parts and components are included therein, such inclusion has been authorized by the Department of Commerce;
(iv) If any U.S.-origin spares are to be reexported to Cuba in connection with a licensed transaction, such reexport has been authorized by the Department of Commerce;
(v) No U.S. dollar accounts are involved; and
(vi) Any financing or other extension of credit by a U.S.-owned or controlled firm is granted on normal short term conditions which are appropriate for the commodity to be exported.
(2) Expenditures incidental to travel to Cuba, and incidental to travel and maintenance in Cuba, of foreign national employees of American-owned or